Financial Budget Process
No matter whether you're a Fortune 500 company or a single person maintaining a household, managing your money means creating a budget. Budgeting allows you to anticipate when you'll have money to save or invest and to plan for those extra-large expenses. Budgeting also allows you to see where your money is really going and to look into your financial future.
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Budgeting Tools
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Budgets can be created on anything from the back of an envelope to sophisticated accounting software systems, but a basic spreadsheet program can meet the needs of any budget without the need for manually calculating and re-calculating the budget every time a change is made. Rows can be used for income and expense items, with columns used to indicate periods of time the budget covers.
Spreadsheet Setup
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Label the first column of the spreadsheet to list specific items of income and expenses. The following columns can be labeled for the periods of time within the budget. For example, an annual budget might label the columns by month with a column labeled "Total" at the end. Other periods recorded might be weeks, quarters or years. You can also insert a title for your budget above your labels if you so desire.
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Listing Income Sources
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The first items to list in your budget are income items, so you may want to place an "Income" label above the items listed in the first column. List every source of income you have, one source in each cell. For example, your personal income might consist of "Job #1," "Job #2," "Interest" or "Investment Income" as items, while a company budget might list such items as "Direct sales" and "Internet sales" or "Region 1 sales," "Region 2 sales", etc. Add another row under all of your income items labeled "Total Income" to display the total income earned in each period.
Listing Expenses
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Under your total income, skip a row and then add the label "Expenses." Beneath your label, list each of your expenses, one in each cell. Be sure you include everything that you spend money on, even small items that may seem insignificant. If you want to plan to save money as well as spend it, add a line item for "Savings" so you'll remember to add the money you put away in your budget. Under the list of expenses, add a line for "Total Expenses," and then two lines down from there, make a line for "Grand Total."
Budget Completion
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Return to the top of your budget and fill in all of the columns you've created with the information listed under income and expense items. For example, if your budget is a monthly one and "Rent" is one of your expenses, then list the amount of rent you plan to pay under each month's heading. Once you've added all of your data, insert the calculating formulas needed for total income, total expenses and grand total (which is total income minus total expenses.) Once you've add the formulas, your budget is complete. If you've included a column labeled "Total" on the far left, insert the formula for making that calculation as well.
Understanding the Budget
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With your complete budget, you can look forward and anticipate periods when your income exceeds your expenses as well as periods when your spend more than you make. You can also see where large, occasional expenses will demand some savings or where your budget plan includes money left over after paying all the bills.
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References
- Photo Credit Cutting budget deficit image by chasingmoments from Fotolia.com
